SWEDEN AND NORWAY: Are they better in or out of the European Union?

Sharing borders in the Scandinavian Peninsula, Norway and Sweden are two culturally, politically and economically similar countries which share a common past. In 1814 the Swedish tropes invaded Norway after its refusal to integrate Sweden (Lambert 2015). However, Norway was allowed to maintain the constitution and was granted considerable autonomy in return for accepting the Swedish monarchy (2015). However, growing Norwegian nationalism led to a referendum in 1905, in which independence won overwhelmingly (2015). From that moment on, despite remaining in close political and economic relationship, both countries have developed separately. In 1960, Norway and Sweden -along with Switzerland, Austria, Denmark, Portugal and the United Kingdom-, funded the European Free Trade Association, an alternative trade organisation to the European Economic Community. After negotiations between the EFTA and the European Community, the European Economic Area was created in 1992, which provided EFTA states access to EU internal trade market and allowed the free circulation of goods, capital, services and people. Some members -Sweden, Finland and Austria- decided to fully integrate into the European Union (Sverdrup 2016; Barh Eide 2016). However, Norwegians refused to join the EU on a referendum in 1994 (they had already rejected it in 1972) (Index Mundi; Press and information team of the Delegation to NORWAY 2016). In 2003, the Swedish voted down adopting the euro currency “concerned about the impact on the economy and sovereignty” (Index Mundi). Both countries have developed a prosperous economy endowed with a sound welfare state, and they have one of the highest standards of living in the world. However, they have adopted different formulas. Norway’s economic success is mainly due to its substantial natural resources such as petroleum, fish, hydropower, forests and minerals, on which it is highly dependent. The oil industry, which is chiefly under government control, is the most important one, accounting for 30% of government revenue (Index Mundi). Likewise, Sweden’s economy is primarily based on the industrial sector -timber, hydropower and iron ore-, which amounts to 50% of its output and export, and is also geared towards foreign trade. But unlike Norway, it falls into the hands of private enterprises (Index Mundi). However, their relationship with the EU and its members has played a key role on their economy. This paper will analyze the different implications that joining and staying out of the EU have had for Sweden and Norway, and will consider the suitability of these decisions.

These magnificent standards of living are illustrated by the high life expectancies (81.6 years in Norway and 81.89 in Sweden), and the comparatively significant amount of the GDP devoted to educational and health expenditures (6.9% and 9.1% in Norway; and 7% and 9.4% in Sweden respectively) (Index Mundi). However, there are significant differences in many aspects:

Evolution of the GDP per capita in Sweden and Norway

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   Figure 1: GDP Per Capita (FindTheData)

 

Norwegians earn 26.17% more money on average than their Swedish counterparts (FindTheData), even though Swedish work 12.38% more time a year; and there is 8% more equality in the distribution of family income (If it were my home.com). Furthermore, Norway has virtually no unemployment (3,6%) compared to the relatively higher Swedish figure (8.1%)[1] (FindTheData). Moreover, despite Sweden nearly doubling Norway in population, Sweden exports ($181.5 billion) are not especially higher than Norwegian exports ($154.2 billion) (Index Mundi). This is mainly due to the huge Norwegian oil exports (1,602 million bbl/day in 2010), whereas Sweden does not export any oil (Index Mundi). Conversely, Sweden imports are considerably higher than Norwegian ones ($158 and $90.14 billion respectively) (Index Mundi). Similarly, Norway’s revenues amount to $292.8 billion, and has fewer expenditures ($225 billion), leading to a surplus of 13.1% of its GDP -one of the few countries in the world with a positive outcome-. Sweden, in contrast, has $283.5 billion revenues and $294.7 billion expenditures, which supposes a deficit of 2% (Index Mundi). Additionally, the Norwegian Government has a significantly lower public debt rate (30.1% of its GDP) than the Swedish Government (41.5%). All these favourable Norwegian economic conditions attract more foreigners (Norway has a net migration rate of 7.96 migrants in a 1,000 population compared to Sweden’s 5.46), which leads to a higher population growth rate (1.19% vs. 0.79% in 2014) (Index Mundi).

However, Sweden stands out in other areas: Its expenditure in research and development is sizably higher (Sweden expends 3.26% of its GDP comparing to Norway’s 1.93%) (FindTheData), and it has better communications: For instance, Sweden has a total of 579,564km roadways, comparing to Norway’s 93,870km (Index Mundi). Moreover, it contributes 8 times more to the European Patent Office. In fact, Sweden has made 491 high-tech patent applications, whilst Norway has done only 61. This reflects the positive effects that Sweden’s membership in the EU has in its contributions to international innovations. Despite Norway’s efforts to produce more renewable energy (69,4% of the total amount of energy came from renewable resources in 2015, in comparison to Sweden’s 53.9%), Sweden consumes 40.45% less electricity per capita than Norway (23,485kWh in Norway and 13,986kWh in Sweden) (If it were my home.com), and 34.48% less oil (2.0832 gallons of oil are consumed in Norway every day per capita, whereas Sweden consumes 1.3650 (If it were my home.com)) . Regarding the CO₂ emissions, Sweden produces 4.62 metric tons per capita, 2.5 less than Norway (FindTheData). Norway’s comparatively high consumption of electricity and oil and sizeable emissions of CO2 find their explanation in its energy-intensive oil industry. Finally, inflation is significantly lower in Sweden (1.1% in 2016) than in Norway (3.9%).

Norwegians are strongly opposed to Norway joining the EU. In fact, Norwegians have already voted it down twice, out of fear of surrendering their sovereignty to a centralised power, which they saw as a threat to their equality and welfare state, and the downturn of their fishing industry and agriculture (Why isn’t Norway in the EU? 2013). However, after these rejections, several partnership and cooperation agreements have been signed between Norway and the EU, the most important of which being the EEA. This agreement has provided access to the EU trade market, alongside reducing “some costs and regulatory uncertainties for third parties associated with non-membership” (Sverdrup 2016). It has also endorsed several additional agreements in security, climate, migration, defence and police  such as the European Defence Agency, Frontex and Europol (Sverdrup 2016). As a consequence of these agreements, Norway is substantively integrated within the EU (Sverdrup 2016). In fact, the EU is the main import and export partner of Norway, adding up to 74% of Norway’s trade (Press and information team of the Delegation to NORWAY 2016), and even though the Norwegian parliament has to approve the new legislation first (European Union [EU]), they have adopted three/quarters of EU legislation to date (Sverdrup 2016; Barh Eide 2016). Additionally, according to the director of the Norwegian Institute of International Affairs Ulf Sverdrup, “EU legislation […] leaves limited room for policy choices, and is most often regarded as technical implementation of the agreement” (2016). Overall, his report[2] views the integration as beneficial for the modernisation and competitiveness of Norway’s economy (Sverdrup 2016). Therefore, as the supporters of its current status (Progress Party, Christian Democratic Party, Centre Party and Socialist Left Party) defend, Norway has been able to thrive despite not being an official EU member, due to its numerous partnership agreements, and has been able to gain a certain degree of sovereignty, which has allowed them to approve or reject policies which directly pertain to them. On the contrary, supporters of joining the EU (Labour Party, Conservative Party and Labour Party) advocate that joining the EU would mean more democracy and stability, and that it would be beneficial for its trade and economic development. However, since 1994 (the year before Sweden joined the EU) and until 2015, Norway’s GDP per capita has increased by 253.8%, whilst Sweden’s has done by 196,4% (FindTheData). Moreover, Norway ranked the first in the Democracy Index 2016 (9.93), outranking Sweden (9.39) (The Economist Intelligence Unit) The only room for criticism is that the current status supposes that Norway has to contribute to the EU budget and abide to its trade regulations, but without having the right to vote on these issues. But on the whole, as the facts prove, Norway’s position has been enormously favourable to its economic and social development.

As for Sweden’s, it is irrefutable that it is a thriving country and that most of its net trade is with EU states (57%) (Arnett  2014) but it is not so clear whether this is thanks to its EU membership. In fact, its high GDP per capita, its welfare state and its environmentally friendly policies are not EU achievements per se. In fact, Norway and Iceland, both non-EU members, are the countries which produce the highest proportion of renewable energy (69.4% and 70.2% respectively), more than four times the EU average (16,7%)

2
Figure 2: Renewable energy 2015 (Eurostat)

(Eurostat). Furthermore, the countries with the highest GDP per capita are non-EU members too (Luxembourg, Switzerland, Norway and Iceland, with the exception of Ireland); and according to data from the European Monetary Fund [EMF], Sweden’s high GDP per capita ($65,871) in 2016 does not correspond with the one of some EU developed and influential countries such as France ($38,537), Italy ($30,294), Spain ($27,012), not to mention the Eastern European countries. Furthermore, although Europe can be a promoter of democratic values and contribute to the democratization of some new EU members, Sweden has suffered the consequences of EU’s incompetence to deal with the refugee crisis, ending up with the highest proportion of asylum seekers per capita in the world (Nelson 2016). Another negative consequence is Sweden’s higher unemployment, which soared in 1993 and 1994, just a year before Sweden joined the EU. Finally, it is usually argued that Sweden contributes considerably more to the EU budget (€ 3,513 billion) that it receives from EU (€ 1,468 billion) (European Union [EU]). That said, it is an undeniable fact that joining the EU has brought several advantages to Sweden, such as price stability, supervised by the European Central Bank, which aims to maintain inflation rates below, but close to, 2% (European Central Bank [ECB]); or the high-tech patent applications. Therefore, it would be daring and conceited to state that Sweden is better out of the EU. It remains to be seen the consequences that Brexit will have for UK’s economy and social liberties, which will be the benchmark for future decisions for Sweden. The only conclusion that can be drawn is that even if a country decides to remain out of the EU or any other multilateral organisation in order to adopt policies that serve their interests, “in a world of interdependence real sovereignty has to be pooled” (Sverdrup 2016) and sacrifices need to be made.ç

[1] Unless otherwise stated, the data is from 2013

[2] The Secretariat of the Norwegian expert report “Outside and Inside: assessing Norway’s agreements with the EU”

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